Commercial Real Estate Market Outlook
Total commercial property transaction volume for the first five months of 2014 was $143 billion, up 19% from the same period in 2013 according to Real Capital Analytics (“RCA”). Sales are expected to increase further throughout the year, with RCA noting a large pipeline of transactions in the office, retail and hotel sectors in particular.
According to CBRE Econometric Advisors (“CBRE-EA”), vacancy rates for all four major property sectors showed improvement during the second quarter:
Multifamily – At the end of the second quarter of 2014, the national vacancy rate for multifamily properties was 4.4%, down 50 bps from the first quarter 2014 and 20 bps from one year ago. As in previous quarters, rent growth was concentrated in the major markets of the west region, with eight out of the ten markets experiencing the highest rent growth (above 5%) in the west.
Retail – The national retail vacancy rate fell 20 bps, to 11.7%, in the second quarter of 2014. This rate also represents a 50 bps improvement from the second quarter of 2013. CBRE-EA projects that this availability decrease will lead to the first rent growth in the sector since the recession.
Office – As of June 30, 2014, the national office vacancy level was 14.5%, down 30 bps from the end of the first quarter 2014. Unlike in the first quarter, the suburban office market outperformed the downtown office market. The downtown vacancy rate fell 30 bps to 11.8% while the suburban vacancy rate fell 40 bps to 15.9%.
Industrial – The national industrial vacancy level fell 30 basis points in the second quarter of 2014, to 10.8%. The industrial sector has now posted 16 straight quarters of vacancy decreases, totaling 370 basis points. The recovery continues to be broad based, with 40 out of the 61 markets CBRE-EA tracks recording decreases.